Strong yen hurts Japanese electronics makers

A man talks on a mobile phone by a Fujitsu billboard at a station in Tokyo Wednesday, Oct. 29, 2008. Fujitsu's profit dropped 21 percent in the most recent quarter as sluggish sales of personal computers and other gadgets offset growth in technology services, the electronics company said Wednesday. (AP Photo/Katsumi Kasahara)
— AP

A man talks on a mobile phone by a Fujitsu billboard at a station in Tokyo Wednesday, Oct. 29, 2008. Fujitsu's profit dropped 21 percent in the most recent quarter as sluggish sales of personal computers and other gadgets offset growth in technology services, the electronics company said Wednesday. (AP Photo/Katsumi Kasahara)
/ AP

TOKYO 
The strong yen crippled quarterly earnings at Sony Corp. and other Japanese electronics makers, adding to their gloomy outlook as the global economic slowdown crimps consumer demand in the ultra-competitive market for high-end gadgets.

"We already expect a poor performance for the Christmas shopping season," Sony's Chief Financial Officer Nobuyuki Oneda told reporters. "On how things will fare after Christmas, I can only say we will continue to keep a careful look."

The global slowdown and strengthening yen are new setbacks for Japan's electronics makers after price wars with Asian rivals forced them into a period of restructuring.

Their earnings are vulnerable to a rising yen, which erodes overseas profits converted into the Japanese currency. Sony, for one, makes about 80 percent of its sales overseas and says it loses 7.5 billion yen ($77 million) in profit for each 1 yen gain against the euro, and 4 billion yen ($40 million) for each 1 yen gain against the dollar.

The yen's recent jump to a 13-year high against the dollar was set off by the global financial crisis. International investors have been rushing to unwind yen "carry" trades, which had taken advantage of Japan's low interest rates to borrow yen to invest elsewhere. Reversing those trades means buying back the yen, lifting its value.

The biggest casualty for Toshiba, Japan's largest chip maker, was the electronic devices business, which wilted under the appreciating yen and steeper-than-expected price declines for NAND flash memory, widely used in consumer electronics.

"The global economy entered into a recessionary phase," Toshiba said in a statement, confirming what many other companies have been saying this earnings season.

Japanese rivals Canon and Panasonic have also reported sharply lower profits for the most recent quarter.

Sony and Toshiba have already cut their forecasts for the fiscal year ending March 2009, and Fujitsu followed suit Wednesday. Fujitsu lowered its forecast to a 60 billion yen ($618 million) profit for the fiscal year. It had earlier expected a 100 billion yen ($1 billion) profit.